P10.41 trillion: New high for PH debt as of February

MANILA, Philippines—The national government’s debt stock climbed to a new high of P10.41 trillion as of February due to more borrowings and a weaker peso.

In a report on Monday (March 29), the Bureau of the Treasury said outstanding debt further increased from P10.33 trillion in January as both domestic and external debts inched up month-on-month.

Compared to level a year ago, the debt pile jumped 27.4 percent from P8.17 trillion in February 2020.

The government ramped up borrowings since the onset of the pandemic to boost the war chest against COVID-19 and offset weaker revenue collections caused by the recession induced by the health crisis and government response to it.

To temper foreign exchange risks while taking advantage of oozing liquidity in the financial system, the government got the bulk of its borrowings locally, raising unpaid domestic debt to P7.36 trillion or 71 percent of total as of February 2021.

Domestic loans rose by only 0.5 percent month-on-month but the year-on-year increase was a bigger 35.1 percent mainly as the outstanding amount included the Bangko Sentral ng Pilipinas’ (BSP) P540-billion provisional advances to the national government in January.

Besides the BSP’s zero-interest short-term loan, the volume of T-bills and bonds sold in February exceeded maturing debt paper, resulting in net availment of domestic financing, the Treasury added.

Foreign debt also inched up by 1.4 percent month-on-month and increased 12 percent year-on-year to P3.04 trillion in February.

The Treasury attributed the month-on-month rise in external debt to an additional P14.53 billion in foreign loans plus a net effect worth P26.33 billion of the peso’s depreciation against the US dollar last month.

It noted that the domestic currency weakened to 48.653:$1 in end-February from 48.076 versus the greenback in January.

Total outstanding debt was expected to surpass P11 trillion by yearend.

For 2021, the programmed P3.03 trillion in gross borrowings — of which the bulk or P2.58 trillion will be borrowed from domestic sources — would further raise the debt-to-gross domestic product (GDP) ratio to a new high of 57 percent.

A measure of a country’s capability to pay its obligations, debt-to-GDP climbed to a 14-year high of 54.5 percent in 2020, reversing pre-pandemic gains that reduced the debt level to a record-low of 39.6 percent of GDP in 2019.

But even with the expected 2021 peak in the debt ratio, economists had pointed out that credit rating agencies and multilateral lenders would only be worried when it breaches 60 percent.

TSB